The accompanying notes are an integral part of these consolidated financial statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2013, 2012 and 2011
(in
thousands, except share and per share data or as otherwise noted)
1.
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
|
Description of Business
FARO Technologies, Inc. and its subsidiaries (collectively the
Company or FARO) design, develop, manufacture, market and support software-based three-dimensional measurement and imaging systems for manufacturing, industrial, building construction and forensic applications. The
Companys principal products include the FaroArm, FARO Laser ScanArm and FARO Gage, all articulated electromechanical measuring devices, and the FARO Laser Tracker ION, FARO Focus
3D
and FARO
3D Imager AMP, all laser-based measuring devices. Markets for the Companys products include automobile, aerospace, heavy equipment, universities and law enforcement agencies. The Company sells the vast majority of its products through a direct
sales force located in many of the worlds largest industrialized countries.
Principles of Consolidation
The
consolidated financial statements of the Company include the accounts of FARO Technologies, Inc. and its subsidiaries, all of which are wholly owned. All intercompany transactions and balances have been eliminated. The financial statements of the
Companys foreign subsidiaries are translated into U.S. dollars using exchange rates in effect at period-end for assets and liabilities and average exchange rates during each reporting period for results of operations. Adjustments resulting
from financial statement translations are reflected as a separate component of accumulated other comprehensive income.
Revenue
Recognition, Product Warranty and Extended Warranty Contracts
Revenue related to the Companys measurement systems (integrated combinations of a measurement device, a computer and software loaded on the computer and the measurement
device) is generally recognized upon shipment, as the Company considers the earnings process complete as of the shipping date. The Company warrants its products against defects in design, materials and workmanship for one year. A provision for
estimated future costs relating to warranty expense is recorded when products are shipped. The Company separately sells extended warranties. Extended warranty revenues are recognized on a straight-line basis over the term of the warranty. Costs
relating to extended warranties are recognized as incurred. Revenue from sales of software only is recognized when no further significant production, modification or customization of the software is required and when the following criteria are met:
persuasive evidence of a sales agreement exists, delivery has occurred, and the sales price is fixed or determinable and deemed collectible. Revenues resulting from sales of comprehensive support, training and technology consulting services are
recognized as such services are performed and are deferred when billed in advance of the performance of services. Revenue from the licensing agreements for the use of the Companys technology for medical applications is generally recognized as
licensees use the technology. Amounts representing royalties for the current year and not received as of year-end are estimated as due based on historical data and recognized in the current year.
Cash and Cash Equivalents
The Company considers cash on hand and amounts on deposit with financial institutions with
maturities of three months or less when purchased to be cash and cash equivalents. The Company had deposits with foreign banks totaling $66.9 million and $53.2 million as of December 31, 2013 and 2012, respectively. The Company does not
presently intend to repatriate those funds. (See Note 12).
41
Accounts Receivable and Related Allowance for Doubtful Accounts
Credit is
extended to customers based on an evaluation of a customers financial condition and, generally, collateral is not required. Accounts receivable are generally due within 30 to 90 days and are stated at amounts due from customers net of an
allowance for doubtful accounts. Accounts outstanding longer than the contractual payment terms are considered past due. The Company makes judgments as to the collectability of accounts receivable based on historical trends and future expectations.
Management estimates an allowance for doubtful accounts, which adjusts gross trade accounts receivable to its net realizable value. The allowance for doubtful accounts is based on an analysis of all receivables for possible impairment issues and
historical write-off percentages. The Company writes off accounts receivable when they become uncollectible, and payments subsequently received on such receivables are credited to the allowance for doubtful accounts. The Company does not generally
charge interest on past due receivables.
Inventories
Inventories are stated at the lower of cost or net realizable
value using the first-in first-out method. Shipping and handling costs are classified as a component of cost of sales in the consolidated statements of operations. Sales demonstration inventory is comprised of measuring devices utilized by sales
representatives to present the Companys products to customers. These products remain in sales demonstration inventory for approximately 6 to 12 months and are subsequently sold at prices that produce slightly reduced gross margins. Service
inventory is comprised of inventory that is not expected to be sold within twelve months, such as training and loaned equipment.
Reserve for Excess and Obsolete Inventory
Since the value of inventory that will ultimately be realized cannot be known
with exact certainty, the Company relies upon both past sales history and future sales forecasts to provide a basis for the determination of the reserve. Inventory is considered potentially obsolete if the Company has withdrawn those products from
the market or had no sales of the product for the past 12 months and has no sales forecasted for the next 12 months. Inventory is considered potentially excess if the quantity on hand exceeds 12 months of expected remaining usage. The resulting
obsolete and excess parts are then reviewed to determine if a substitute usage or a future need exists. Items without an identified current or future usage are reserved in an amount equal to 100% of the FIFO cost of such inventory. The
Companys products are subject to changes in technologies that may make certain of its products or their components obsolete or less competitive, which may increase its historical provisions to the reserve.
Property and Equipment
Property and equipment purchases exceeding a thousand dollars are capitalized and recorded at cost.
Depreciation is computed using the straight-line method over the estimated useful lives of the various classes of assets as follows:
|
|
|
Machinery and equipment
|
|
2 to 5 years
|
Furniture and fixtures
|
|
3 to 10 years
|
Leasehold improvements are amortized on a straight-line basis over the lesser of the life of the asset or the
remaining term of the lease, not to exceed 7 years.
Depreciation expense was $5,825, $5,769 and $5,394 in 2013, 2012 and 2011,
respectively. Accelerated methods of depreciation are used for income tax purposes in contrast to book purposes, and as a result, appropriate provisions are made for the related deferred income taxes.
42
Goodwill and Intangibles
Goodwill represents the excess cost of a business
acquisition over the fair value of the net assets acquired. Indefinite-life identifiable intangible assets and goodwill are not amortized but are tested for impairment at least annually. The Company performs its annual review in the fourth quarter
of each year, or more frequently if indicators of potential impairment exist, to determine if the carrying value of the recorded goodwill or indefinite lived intangible assets is impaired. If an asset is impaired, the difference between the value of
the asset reflected on the financial statements and its current fair value is recognized as an expense in the period in which the impairment occurs.
Each period, and for any of its reporting units, the Company can elect to initially perform a qualitative assessment to determine whether it
is necessary to perform the two-step quantitative goodwill impairment test. If the Company believes, as a result of its qualitative assessment, that it is not more likely than not that the fair value of a reporting unit containing goodwill is less
than its carrying amount, then the first and second steps of the quantitative goodwill impairment test are unnecessary. If the Company elects to bypass the qualitative assessment option, or if the qualitative assessment was performed and resulted in
the Company being unable to conclude that it is not more likely than not that the fair value of a reporting unit containing goodwill is less than its carrying amount, the Company will perform the two-step quantitative goodwill impairment test. The
Company performs the first step of the two-step quantitative goodwill impairment test by calculating the fair value of the reporting unit using a discounted cash flow method, and then comparing the fair value with the carrying amount of the
reporting unit. If the carrying amount of the reporting unit exceeds its fair value, the Company performs the second step of the quantitative goodwill impairment test to measure the amount of the impairment loss, if any. Management has concluded
there was no goodwill impairment for the years ended December 31, 2013, 2012, and 2011.
Other intangible assets principally include
patents, existing product technology and customer relationships that arose in connection with the Companys acquisitions of iQvolution AG and Dimensional Photonics International. Other intangible assets are recorded at fair value at the date of
acquisition and are amortized over their estimated useful lives of 3 to 20 years.
Product technology and patents are recorded at cost.
Amortization is computed using the straight-line method over the lives of the patents.
Long-Lived Assets
Long-lived
assets, other than goodwill and indefinite lived intangible assets, are evaluated for impairment when events or changes in business circumstances indicate that the carrying amount of the assets may not be fully recoverable. Management has concluded
that there were no indications of impairment of these assets for the years ended December 31, 2013, 2012 and 2011.
Research
and Development
Research and development costs incurred in the discovery of new knowledge and the resulting translation of this new knowledge into plans and designs for new products, prior to the attainment of the related products
technological feasibility, are recorded as expenses in the period incurred.
Reserve for Warranties
The Company
establishes at the time of sale a liability for the one year warranty included with the initial purchase price of equipment, based upon an estimate of the repair expenses likely to be incurred for the warranty period. The warranty period is measured
in installation-months for each major product group. The warranty reserve is included in accrued liabilities in the accompanying consolidated balance sheets. The warranty expense is estimated by applying the actual total repair expenses for each
product group in the prior period and determining a rate of repair expense per installation-month. This repair rate is multiplied by the number of installation-months of warranty for each product group to determine the provision for warranty
expenses for the period. The Company evaluates its exposure to warranty costs at the end of each period using the estimated expense per installation-month for each major product group, the number of units remaining under warranty and the remaining
number of months each unit will be under warranty. The Company has a history of new product introductions and enhancements to existing products, which may result in unforeseen issues that increase its warranty costs. While such expenses have
historically been within expectations, the Company cannot guarantee this will continue in the future.
43
Income Taxes
The Company reviews its deferred tax assets on a regular basis to
evaluate their recoverability based upon expected future reversals of deferred tax liabilities, projections of future taxable income, and tax planning strategies that the Company might employ to utilize such assets, including net operating loss
carryforwards. Based on the positive and negative evidence for recoverability, the Company establishes a valuation allowance against the net deferred tax assets of a taxing jurisdiction in which the Company operates unless it is more likely
than not that the Company will recover such assets through the above means. In the future, the Companys evaluation of the need for the valuation allowance will be significantly influenced by the Companys ability to achieve
profitability and the Companys ability to predict and achieve future projections of taxable income over a two-year period.
The Company recognizes tax benefits related to uncertain tax positions only if it is more likely than not the tax position will be sustained
upon examination by taxing authorities. For those positions where it is more-likely than not that a tax benefit will be sustained, no tax benefit has been recognized in the financial statements. In the ordinary course of business, the Company and
its subsidiaries are examined by various federal, state, and foreign tax authorities. The Company regularly assesses the potential outcomes of these examinations and any future examinations for the current or prior years in determining the adequacy
of its provision for income taxes.
Fair Value of Financial Instruments
The Companys financial instruments
include cash and cash equivalents, short-term investments, accounts receivable and accounts payable and accrued liabilities. Due to their short-term nature, the carrying amounts of such financial instruments approximate their fair value.
Earnings Per Share
Basic earnings per share (EPS) is computed by dividing earnings available to common
shareholders by the weighted-average number of common shares outstanding for the period. Diluted EPS includes the effect of all potentially dilutive common shares. A reconciliation of the number of common shares used in calculation of basic and
diluted EPS is presented in Note 15 - Earnings Per Share.
Concentration of Credit Risk
Financial instruments that
expose the Company to concentrations of credit risk consist principally of short-term investments and operating demand deposit accounts. The Companys policy is to place its operating demand deposit accounts with high credit quality financial
institutions.
Estimates
The preparation of financial statements in conformity with accounting principles generally
accepted in the United States of America (U.S. GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Impact of Recently Issued Accounting Standards
In June 2011, the Financial Accounting Standards Board, (FASB) issued Accounting Standards Update (ASU) 2011-05,
Comprehensive Income (Topic 220): Presentation of Comprehensive Income (ASU 2011-05)
. ASU 2011-05 requires companies to present the components of net income and other comprehensive income either as one continuous statement or as
two consecutive statements. It eliminates the option to present components of other comprehensive income as part of the changes in shareholders equity. The standard does not change the items which must be reported in other comprehensive
income, how such items are measured or when they must be reclassified to net income. The Company has elected to
44
present the components of net income and other comprehensive income as two consecutive statements. ASU 2011-05 was effective for interim and annual periods beginning after December 15, 2011.
The adoption of ASU 2011-05 during the quarter ended March 31, 2012 and for subsequent periods only impacted presentation and did not have any effect on the Companys consolidated financial statements or on its financial condition.
In December 2011, the FASB issued ASU No. 2011-12,
Comprehensive Income (Topic 220): Deferral of the Effective Date for Amendments to
the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05
(ASU 2011-12). ASU 2011-12 defers the specific requirement to present items that are
reclassified from accumulated other comprehensive income to net income separately with their respective components of net income and other comprehensive income. As part of this update, the FASB did not defer the requirement to report comprehensive
income either in a single continuous statement or in two separate but consecutive financial statements. In February 2013, the FASB issued ASU 2013-02,
Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of Accumulated Other
Comprehensive Income (ASU 2012-03)
, which is effective for reporting periods beginning after December 15, 2012. The specific requirements of ASU 2013-02 did not have any impact on the Companys consolidated financial
statements.
2.
|
SUPPLEMENTAL CASH FLOW INFORMATION
|
Selected cash payments and non-cash activities were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years ended December 31,
|
|
|
|
2013
|
|
|
2012
|
|
|
2011
|
|
|
|
|
|
Cash paid for interest
|
|
$
|
8
|
|
|
$
|
28
|
|
|
$
|
34
|
|
|
|
|
|
Cash paid for income taxes
|
|
|
10,286
|
|
|
|
5,256
|
|
|
|
5,422
|
|
3.
|
ALLOWANCE FOR DOUBTFUL ACCOUNTS
|
Activity in the allowance for doubtful accounts was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years ended December 31,
|
|
|
|
2013
|
|
|
2012
|
|
|
2011
|
|
Balance, beginning of year
|
|
$
|
3,780
|
|
|
$
|
4,585
|
|
|
$
|
4,700
|
|
Provision (net of recovery)
|
|
|
1,001
|
|
|
|
(23
|
)
|
|
|
2,169
|
|
Amounts written off, net of recoveries
|
|
|
(1,095
|
)
|
|
|
(782
|
)
|
|
|
(2,284
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, end of year
|
|
$
|
3,686
|
|
|
$
|
3,780
|
|
|
$
|
4,585
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
45
4.
|
SHORT-TERM INVESTMENTS
|
Short-term investments of $65.0 million at December 31, 2013 and 2012 are comprised of U.S. Treasury Bills that mature
through June 12, 2014. The interest rate on the U.S. Treasury Bills is less than one percent. The investments are classified as held-to-maturity and recorded at cost. The fair value of the U.S. Treasury Bills at December 31, 2013
and 2012 approximated cost.
Inventories consist of the following:
|
|
|
|
|
|
|
|
|
|
|
As of
December 31, 2013
|
|
|
As of
December 31, 2012
|
|
Raw materials
|
|
$
|
23,692
|
|
|
$
|
28,146
|
|
Finished goods
|
|
|
7,176
|
|
|
|
6,188
|
|
Sales demonstration inventory
|
|
|
19,545
|
|
|
|
18,729
|
|
Reserve for excess and obsolete
|
|
|
(1,473
|
)
|
|
|
(4,169
|
)
|
|
|
|
|
|
|
|
|
|
Inventory
|
|
$
|
48,940
|
|
|
$
|
48,894
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service inventory
|
|
$
|
19,033
|
|
|
$
|
19,125
|
|
|
|
|
|
|
|
|
|
|
The Companys goodwill at December 31, 2013 and 2012 is related to its previous acquisitions of three businesses.
The Company evaluates each reporting units fair value as compared to its carrying value on December 31 of each year or more frequently if events or changes in circumstances indicate that the carrying value may exceed the fair value. The
Company first performs a qualitative assessment to determine whether it is necessary to perform the two-step goodwill impairment test. If Step 1 of the quantitative goodwill impairment test is performed, the fair value of a reporting unit is
measured using a discounted cash flow model incorporating discount rates commensurate with the risks involved for each reporting unit. The key assumptions used in the discounted cash flow model include discount rates, growth rates, cash flow
projections and terminal value rates. These rates are susceptible to change and require significant management judgment. Impairments to goodwill are charged against earnings in the period the impairment is identified. The Company has two reporting
units for which goodwill was tested on December 31, 2013: the Americas Region, and the Europe/Africa Region, as shown in the table below. As of December 31, 2013 and 2012, the Company did not have any goodwill that was identified as
impaired. The changes in goodwill of $0.5 million in 2013 and $0.2 million in 2012 are due to adjustments for changes in foreign exchange rates related to an acquisition made in 2005.
46
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign
|
|
|
|
|
|
|
Beginning
|
|
|
|
|
|
Currency
|
|
|
Ending
|
|
December 31, 2013
|
|
Balance
|
|
|
Additions
|
|
|
Translation
|
|
|
Balance
|
|
|
|
|
|
|
Americas Region
|
|
$
|
6,994
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
6,994
|
|
Europe/Africa region
|
|
|
11,822
|
|
|
|
|
|
|
|
542
|
|
|
|
12,364
|
|
Asia Pacific Region
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
18,816
|
|
|
$
|
|
|
|
$
|
542
|
|
|
$
|
19,358
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign
|
|
|
|
|
|
|
Beginning
|
|
|
|
|
|
Currency
|
|
|
Ending
|
|
December 31, 2012
|
|
Balance
|
|
|
Additions
|
|
|
Translation
|
|
|
Balance
|
|
|
|
|
|
|
Americas Region
|
|
$
|
6,994
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
6,994
|
|
Europe/Africa region
|
|
|
11,616
|
|
|
|
|
|
|
|
206
|
|
|
|
11,822
|
|
Asia Pacific Region
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
18,610
|
|
|
$
|
|
|
|
$
|
206
|
|
|
$
|
18,816
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intangible assets consist of the following:
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2013
|
|
|
2012
|
|
Amortizable intangible assets:
|
|
|
|
|
|
|
|
|
Product technology
|
|
$
|
10,917
|
|
|
$
|
10,260
|
|
Patents
|
|
|
10,599
|
|
|
|
8,500
|
|
Other
|
|
|
8,028
|
|
|
|
7,749
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
29,544
|
|
|
|
26,509
|
|
Accumulated amortization
|
|
|
(21,432
|
)
|
|
|
(19,461
|
)
|
|
|
|
|
|
|
|
|
|
Intangible assets - net
|
|
$
|
8,112
|
|
|
$
|
7,048
|
|
|
|
|
|
|
|
|
|
|
47
Amortization expense was $1,213, $1,207 and $1,318 in 2013, 2012 and 2011, respectively. The
estimated amortization expense for each of the years 2014 through 2018 and thereafter is as follows:
|
|
|
|
|
Years ending December 31,
|
|
Amount
|
|
2014
|
|
$
|
1,142
|
|
2015
|
|
|
1,090
|
|
2016
|
|
|
959
|
|
2017
|
|
|
857
|
|
2018
|
|
|
607
|
|
Thereafter
|
|
|
3,457
|
|
|
|
|
|
|
|
|
$
|
8,112
|
|
|
|
|
|
|
Accrued liabilities consist of the following:
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
|
|
2013
|
|
|
2012
|
|
Accrued compensation and benefits
|
|
$
|
11,591
|
|
|
$
|
9,364
|
|
Accrued warranties
|
|
|
2,364
|
|
|
|
2,359
|
|
Professional and legal fees
|
|
|
1,203
|
|
|
|
1,472
|
|
Other accrued liabilities
|
|
|
4,975
|
|
|
|
5,021
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
20,133
|
|
|
$
|
18,216
|
|
|
|
|
|
|
|
|
|
|
Activity related to accrued warranties was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years ended December 31,
|
|
|
|
2013
|
|
|
2012
|
|
|
2011
|
|
Beginning Balance
|
|
$
|
2,359
|
|
|
$
|
2,365
|
|
|
$
|
1,857
|
|
Provision for warranty expense
|
|
|
3,541
|
|
|
|
3,071
|
|
|
|
2,953
|
|
Warranty expired
|
|
|
(3,536
|
)
|
|
|
(3,077
|
)
|
|
|
(2,445
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending Balance
|
|
$
|
2,364
|
|
|
$
|
2,359
|
|
|
$
|
2,365
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
On July 11, 2006, the Company entered into a loan agreement providing for an available line of credit of $30.0 million,
which was most recently amended on March 15, 2012. Loans under the Amended and Restated Loan Agreement, as amended, bear interest at the rate of LIBOR plus a fixed percentage between 1.50% and 2.00% and require the Company to maintain a minimum
cash balance and tangible net worth measured at the end of each of the Companys fiscal quarters. As of December 31, 2013, the Company was in compliance with all of the covenants under the Amended and Restated Loan Agreement, as amended.
The term of the Amended and Restated Loan Agreement, as amended, expires on March 31, 2015. The Company has not drawn on this line of credit in 2013 and 2012.
48
Assets under capital leases were $23 and $230 at December 31, 2013 and 2012, respectively. Accumulated depreciation on
assets under capital leases was $23 and $195 at December 31, 2013 and 2012, respectively.
Other expense, net consists of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years ended December 31,
|
|
|
|
2013
|
|
|
2012
|
|
|
2011
|
|
Foreign exchange transaction losses (gains)
|
|
$
|
1,307
|
|
|
$
|
642
|
|
|
$
|
1,049
|
|
Other
|
|
|
50
|
|
|
|
102
|
|
|
|
168
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other expense (income), net
|
|
$
|
1,357
|
|
|
$
|
744
|
|
|
$
|
1,217
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income tax expense consists of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years ended December 31,
|
|
|
|
2013
|
|
|
2012
|
|
|
2011
|
|
Domestic
|
|
$
|
14,842
|
|
|
$
|
8,310
|
|
|
$
|
14,268
|
|
Foreign
|
|
|
14,020
|
|
|
|
22,632
|
|
|
|
17,437
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes
|
|
$
|
28,862
|
|
|
$
|
30,942
|
|
|
$
|
31,705
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
49
The components of the income tax expense (benefit) for income taxes are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years ended December 31,
|
|
|
|
2013
|
|
|
2012
|
|
|
2011
|
|
Current:
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
$
|
4,859
|
|
|
$
|
4,418
|
|
|
$
|
4,356
|
|
State
|
|
|
472
|
|
|
|
429
|
|
|
|
423
|
|
Foreign
|
|
|
3,751
|
|
|
|
5,537
|
|
|
|
4,195
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current income tax expense (benefit)
|
|
|
9,082
|
|
|
|
10,384
|
|
|
|
8,974
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred:
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
|
(1,105
|
)
|
|
|
(1,871
|
)
|
|
|
(400
|
)
|
State
|
|
|
(108
|
)
|
|
|
(183
|
)
|
|
|
(40
|
)
|
Foreign
|
|
|
(516
|
)
|
|
|
(386
|
)
|
|
|
(206
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred income tax expense (benefit)
|
|
|
(1,729
|
)
|
|
|
(2,440
|
)
|
|
|
(646
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense (benefit)
|
|
$
|
7,353
|
|
|
$
|
7,944
|
|
|
$
|
8,328
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense (benefit) for the years ended December 31, 2013, 2012, and 2011 differ from the amount computed by
applying the federal statutory corporate rate to income before income taxes. The differences are recorded as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years ended December 31,
|
|
|
|
2013
|
|
|
2012
|
|
|
2011
|
|
Tax expense (benefit) at statutory rate of 35%
|
|
$
|
10,102
|
|
|
$
|
10,830
|
|
|
$
|
11,097
|
|
State income taxes, net of federal benefit
|
|
|
490
|
|
|
|
274
|
|
|
|
471
|
|
Foreign tax rate difference
|
|
|
(1,634
|
)
|
|
|
(2,858
|
)
|
|
|
(2,910
|
)
|
Research and development credit
|
|
|
(957
|
)
|
|
|
|
|
|
|
(418
|
)
|
Change in valuation allowance
|
|
|
(187
|
)
|
|
|
3
|
|
|
|
612
|
|
Equity based compensation
|
|
|
(212
|
)
|
|
|
(225
|
)
|
|
|
(91
|
)
|
Manufacturing credit
|
|
|
(249
|
)
|
|
|
(139
|
)
|
|
|
(474
|
)
|
Other
|
|
|
|
|
|
|
59
|
|
|
|
41
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total income tax expense
|
|
$
|
7,353
|
|
|
$
|
7,944
|
|
|
$
|
8,328
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The components of the Companys net deferred income tax assets and liabilities are as follows:
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2013
|
|
|
2012
|
|
Net deferred income tax asset - Current
|
|
|
|
|
|
|
|
|
Intercompany profit in inventory
|
|
$
|
|
|
|
$
|
2,252
|
|
Warranty costs
|
|
|
348
|
|
|
|
290
|
|
Bad debt reserve
|
|
|
73
|
|
|
|
139
|
|
Inventory reserve
|
|
|
253
|
|
|
|
1,059
|
|
Unearned service revenue
|
|
|
2,992
|
|
|
|
2,741
|
|
Other, net
|
|
|
935
|
|
|
|
735
|
|
|
|
|
|
|
|
|
|
|
Net deferred income tax asset - Current
|
|
$
|
4,601
|
|
|
$
|
7,216
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net deferred income tax asset - Non-current
|
|
|
|
|
|
|
|
|
Depreciation
|
|
$
|
(1,559
|
)
|
|
$
|
(1,871
|
)
|
Goodwill amortization
|
|
|
(1,841
|
)
|
|
|
(1,675
|
)
|
Product design costs
|
|
|
(259
|
)
|
|
|
(190
|
)
|
Employee stock options
|
|
|
3,021
|
|
|
|
1,548
|
|
Unearned service revenue
|
|
|
1,654
|
|
|
|
1,522
|
|
Loss carryforwards
|
|
|
14,983
|
|
|
|
14,825
|
|
|
|
|
|
|
|
|
|
|
Deferred income tax asset - Non-current
|
|
|
15,999
|
|
|
|
14,159
|
|
|
|
|
|
|
|
|
|
|
Valuation Allowance
|
|
|
(11,576
|
)
|
|
|
(11,763
|
)
|
|
|
|
|
|
|
|
|
|
Net deferred income tax asset - Non-current
|
|
$
|
4,423
|
|
|
$
|
2,396
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net deferred income tax liability - Non-current
|
|
|
|
|
|
|
|
|
Intangible assets
|
|
$
|
(1,171
|
)
|
|
$
|
(1,149
|
)
|
|
|
|
|
|
|
|
|
|
50
The effective income tax rate for 2013, 2012, and 2011 includes a reduction in the statutory
corporate tax rates for the Companys operations in Switzerland. The favorable tax rate ruling requires the Company to maintain a certain level of manufacturing operations in Switzerland. The aggregate dollar effect of this favorable tax rate
was approximately $0.2 million, or $0.01 per share, in the year ended December 31, 2013, $0.9 million, or $0.05 per share, in the year ended December 31, 2012, and $0.9 million, or $0.05 per share, in the year ended December 31, 2011.
In 2005, the Company opened a regional headquarters and began to manufacture its products in Singapore. In the third quarter of 2006, the
Company received confirmation of a tax holiday for its operations from the Singapore Economic Development Board for a period of four years commencing January 1, 2006 and an additional six-year extension at a favorable tax rate subject to
certain terms and conditions including employment, spending, and capital investment. The Company and the Singapore Economic Development Board mutually agreed to end the program as of December 31, 2011, as the Company has expanded its operations
in other locations within Asia to meet market demand. The aggregate dollar effect of this favorable tax rate was approximately $0.3 million, or $0.02 per share, in the year ended December 31, 2011.
At December 31, 2013 and 2012, the Companys domestic entities had deferred income tax assets in the amount of $5,476 and $4,264,
respectively.
At December 31, 2013 and 2012, the Companys foreign subsidiaries had deferred income tax assets relating to net
operating loss carry forwards, some of which expire in 5 to 15 years and others which can be carried forward indefinitely, of $14,983 and $14,825, respectively. For financial reporting purposes, a valuation allowance of $11,576 and $11,763,
respectively, has been recognized to offset the deferred tax assets relating to net operating losses. The Company maintains a valuation allowance on net operating losses in jurisdictions for which it does not have a history of earnings over the last
three years and where the Company believes that the deferred tax assets are not more-likely-than-not to be realized based upon two-year projections of taxable income. The Company released a valuation allowance of approximately $1.2 million in the
year ended December 31, 2010 related to net operating losses of a subsidiary in Germany as a result of being included in a group consolidated tax filing with net taxable earnings.
The Company has not recognized any U.S. tax expense on undistributed international earnings, as it intends to reinvest the earnings outside
the U.S. for the foreseeable future. The Companys net undistributed international earnings were approximately $78.2 million and $67.1 million at December 31, 2013 and 2012, respectively.
Significant judgment is required in determining the Companys worldwide provision for income taxes. In the ordinary course of a global
business, there are many transactions for which the ultimate tax outcome is uncertain. The Company reviews its tax contingencies on a regular basis and makes appropriate accruals as necessary.
As of December 31, 2013 and 2012, the Companys gross unrecognized tax benefits totaled $0.3 million, which includes approximately
$0.03 million of interest and penalties. The Company estimates that the unrecognized tax benefits will not change significantly within the next year.
51
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years ended December 31,
|
|
|
|
2013
|
|
|
2012
|
|
|
2011
|
|
|
|
|
|
Balance at January 1,
|
|
$
|
265
|
|
|
$
|
265
|
|
|
$
|
265
|
|
Additions based on tax positions related to the current year
|
|
|
|
|
|
|
|
|
|
|
|
|
Additions for tax positions of prior years
|
|
|
|
|
|
|
|
|
|
|
|
|
Reductions for tax positions of prior years
|
|
|
|
|
|
|
|
|
|
|
|
|
Settlements
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31,
|
|
$
|
265
|
|
|
$
|
265
|
|
|
$
|
265
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company and its subsidiaries file income tax returns in the U.S. federal jurisdiction and various state
and foreign jurisdictions. The table below summarizes the open tax years and ongoing tax examinations in major jurisdictions as of December 31, 2013:
|
|
|
|
|
|
|
|
|
Jurisdiction
|
|
Open Years
|
|
|
Examination
in Process
|
|
|
|
|
United States - Federal Income Tax
|
|
|
2009 - 2013
|
|
|
|
N/A
|
|
United States - various states
|
|
|
2009 - 2013
|
|
|
|
N/A
|
|
Germany
|
|
|
2008 - 2013
|
|
|
|
N/A
|
|
Switzerland
|
|
|
2013
|
|
|
|
N/A
|
|
Singapore
|
|
|
2009 - 2013
|
|
|
|
N/A
|
|
The Company recognizes accrued interest and penalties related to unrecognized tax benefits in tax expense. The
total amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate is $0.3 million. FARO does not currently anticipate that the total amount of unrecognized tax benefits will result in material changes to its
financial position. The Company is subject to income taxes at the federal, state and foreign country level. The Companys tax returns are subject to examination at the U.S. federal level from 2009 forward and at the state level subject to a
three to four year statute of limitations. In September 2013, the U.S. Internal Revenue Service issued new regulations for capitalizing and deducting costs incurred to acquire, produce, or improve tangible property. These new regulations are
effective for taxable years beginning on or after January 1, 2014; however, they are considered enacted as of the date of issuance. As a result of the new regulations, the Company is in the process of reviewing its existing income tax accounting
methods related to tangible property. The Company believes that the new regulations will not have a material effect on the Companys consolidated financial statements.
52
13.
|
COMMITMENTS AND CONTINGENCIES
|
Leases
The Company leases buildings and equipment under operating leases through 2024. The following is
a schedule of future minimum lease payments required under non-cancelable operating leases with initial terms in excess of one year, in effect at December 31, 2013:
|
|
|
|
|
Years ending December 31,
|
|
Amount
|
|
2014
|
|
$
|
6,000
|
|
2015
|
|
|
4,800
|
|
2016
|
|
|
4,116
|
|
2017
|
|
|
3,774
|
|
2018
|
|
|
3,740
|
|
Thereafter
|
|
|
7,595
|
|
|
|
|
|
|
Total future minimum lease payments
|
|
$
|
30,025
|
|
|
|
|
|
|
Rent expense for 2013, 2012 and 2011 was $5,227, $4,917 and $5,176, respectively.
Patent Matters
On July 11, 2008, Metris USA, Inc. and its affiliates, Metris N.V., Metris IPR N.V. and 3-D Scanners
Ltd., filed a complaint against the Company for patent infringement in the U.S. District Court for the District of Massachusetts (the Massachusetts Court) concerning U.S. Patent Nos. 6,611,617 and 7,313,264 (hereinafter, the
patents-in-suit). Following an acquisition by Nikon Corporation in late 2009, Metris USA, Inc. subsequently changed its name to Nikon Metrology, Inc., Metris N.V. changed its name to Nikon Metrology NV, and Metris IPR N.V. was dissolved
and merged into Nikon Metrology NV. We refer to each of Nikon Metrology, Inc., Nikon Metrology NV, and 3-D Scanners Ltd. as Plaintiffs or Nikon.
The Company responded to the complaint with counterclaims alleging that the patents-in-suit, which are generally directed to laser scanning
devices, are invalid, non-infringed, and unenforceable due to fraud during prosecution of the patents in the U.S. Patent and Trademark Office. On August 31, 2009, the Massachusetts Court granted the Companys motion to add counterclaims
and defenses for violation of federal and state antitrust and unfair competition laws based on the alleged knowing assertion of invalid and fraudulent patents. The Company also filed an amended counterclaim to add the Plaintiffs parent
company, Nikon Corporation, as a counterclaim defendant.
On July 14, 2010, the Company filed a motion for summary judgment of
non-infringement of both patents-in-suit. On August 31, 2010, Nikon filed a motion for summary judgment against the Companys counterclaims for antitrust violations and unfair trade practices.
On September 19, 2011, the Massachusetts Court ruled that the Company did not infringe U.S. Patent No. 6,611,617. The
Massachusetts Court also granted Nikons motion for summary judgment on the Companys counterclaims for anti-trust violations and unfair trade practices. The Massachusetts Court denied the Companys motion for summary judgment of
non-infringement of U.S. Patent No. 7,313,264. The effect of the ruling was to reduce or eliminate the Companys exposure with respect to claims associated with U.S. Patent No. 6,611,617, while the patent dispute with respect to
U.S. Patent No. 7,313,264 continued.
On August 10, 2012, following a two-week jury trial on the remaining claims related to U.S.
Patent No. 7,313,264, the jury determined the asserted patent claims were invalid, and on August 13, 2012, the Massachusetts Court entered judgment for the Company. The Massachusetts Court sustained this verdict on January 23,
2013, denying all post-trial motions except the Companys motion for attorneys fees. On February 21, 2013, the Massachusetts Court stayed the Companys motion for attorneys fees pending resolution of any appeals to
the U.S. Federal Circuit.
53
On March 20, 2013, the Massachusetts Court entered Final Judgment in the Companys
favor, awarding the Company its costs. On April 10, 2013, the Company filed a notice of appeal to the U.S. Federal Circuit with respect to the Massachusetts Courts failure to address the inequitable conduct by the inventor and
related patent misuse and anti-trust issues.
On July 10, 2013, the matter was settled with no impact to the Companys financial
statements.
14.
|
STOCK COMPENSATION PLANS
|
The Company has four compensation plans that provide for the granting of stock options and other share-based awards to key
employees and non-employee members of the Board of Directors. The 1997 Employee Stock Option Plan (1997 Plan) provides for granting incentive stock options and nonqualified stock options to officers and key employees of the Company. The
1997 Non-employee Director Stock Option Plan provides for granting nonqualified stock options and formula options to non-employee directors. The 2004 Equity Incentive Plan (2004 Plan) and the 2009 Equity Incentive Plan (2009
Plan) provide for granting options, restricted stock, restricted stock units or stock appreciation rights to employees and non-employee directors.
The Company was authorized to grant awards for up to 1,400,000 shares of common stock under the 1997 Plan, of which no options remain
outstanding. The Company was also authorized to grant awards for up to 250,000 shares of common stock under the 1997 Non-employee Director Stock Option Plan, and all of such options have been exercised. The Company was also authorized to grant
awards for up to 1,750,000 shares of common stock under the 2004 Plan, of which 144,606 options are currently outstanding at exercise prices between $13.04 and $31.06. These options have a 10-year term (7 years on grants beginning in 2010) and vest
over a 3-year period. The Company will not make any further grants under the 1997 Plan, the 1997 Non-employee Director Stock Option Plan or the 2004 Plan. The Company is authorized to grant awards for up to 1,781,546 shares of common stock under the
2009 Plan, as well as any shares underlying awards outstanding under the 2004 Plan as of the effective date of the 2009 Plan that thereafter terminate or expire unexercised or are canceled, forfeited or lapse for any reason. There are 669,685
options currently outstanding under the 2009 Plan at exercise prices between $24.30 and $57.01. Prior to 2009, upon election to the Board, each non-employee director was granted 3,400 restricted shares of common stock that vested ratably over three
years. On the day following the Annual Meeting of Shareholders, each non-employee director, other than a non-employee director who received the initial equity grant in that same year, was granted 2,200 restricted shares of common stock that vested
ratably over three years.
Prior to 2013, upon election to the Board, each non-employee director receives an initial equity grant of
shares of restricted common stock with a value equal to $100,000, calculated using the closing share price on the date of the non-employee directors election to the Board. The initial restricted stock grant vests on the third anniversary of
the grant date, subject to the non-employee directors continued membership on the Board. Annually on the first business
54
day following the annual meeting of shareholders, each non-employee director was granted restricted shares of common stock with a value equal to $70,000, calculated as of the closing share price
on that day. The shares of restricted stock vest on the day prior to the following years annual meeting date, subject to the non-employee directors continued membership on the Board.
Beginning in 2013, upon election to the Board, each non-employee director receives an initial equity grant of shares of restricted common
stock with a value equal to $100,000, calculated using the closing share price on the date of the non-employee directors election to the Board. The initial restricted stock grant vests on the third anniversary of the grant date, subject to the
non-employee directors continued membership on the Board. Annually on the first business day following the annual meeting of shareholders, each non-employee director is granted restricted shares of common stock with a value equal to $80,000,
calculated as of the closing share price on that day. The shares of restricted stock vest on the day prior to the following years annual meeting date, subject to a directors continued membership on the Board. The Company records
compensation cost associated with its restricted stock unit grants on a straight-line basis over the vesting term.
Compensation costs
charged to operations associated with the Companys stock incentive plans were $4,409, $4,080, and $2,756 in 2013, 2012, and 2011, respectively. The changes in stock option associated compensation cost were due to the vesting of options and the
accrual of expenses relating to the issuance of restricted stock.
The Company used the Black-Scholes option-pricing model to determine
the fair value of grants made using the following assumptions:
|
|
|
|
|
|
|
|
|
For the Years Ended December 31
|
|
|
2013
|
|
2012
|
|
2011
|
Risk-free interest rate
|
|
0.55% - 1.03%
|
|
0.50% - 0.66%
|
|
0.66% and 1.83%
|
Expected dividend yield
|
|
0%
|
|
0%
|
|
0%
|
Expected option life
|
|
4 years
|
|
4 years
|
|
4 years
|
Expected volatility
|
|
46.1% - 48.4%
|
|
50.4% - 50.7%
|
|
47.9% - 48.7%
|
Weighted-average expected volatility
|
|
48.2%
|
|
50.7%
|
|
48.7%
|
Historical information was the primary basis for the selection of the expected dividend yield, expected
volatility and the expected lives of the options. The risk-free interest rate was based on yields of U.S. zero coupon issues and U.S. Treasury issues, with a term equal to the expected life of the option being valued.
55
A summary of stock option activity and weighted average exercise prices follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options
|
|
|
Weighted-
Average
Exercise Price
|
|
|
Weighted-Average
Remaining
Contractual Term
|
|
|
Aggregate Intrinsic
Value as of
December 31, 2013
|
|
Outstanding at January 1, 2013
|
|
|
831,504
|
|
|
$
|
36.31
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
268,019
|
|
|
|
43.15
|
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
(88,180
|
)
|
|
|
46.08
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(197,052
|
)
|
|
|
27.83
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at December 31, 2013
|
|
|
814,291
|
|
|
$
|
39.56
|
|
|
|
4.5
|
|
|
$
|
15,262
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options exercisable at December 31, 2013
|
|
|
365,477
|
|
|
$
|
31.46
|
|
|
|
3.2
|
|
|
$
|
9,808
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The weighted-average grant-date fair value of the stock options granted during the years ended
December 31, 2013, 2012 and 2011 were $14.41, $22.28 and $14.15, respectively. The aggregate intrinsic value of stock options exercised during the years ended December 31, 2013, 2012 and 2011 was $3.7 million, $7.1 million and $10.4
million, respectively. The total fair value of stock options using the Black-Scholes option pricing model vested during the years ended December 31, 2013, 2012 and 2011 was $3.3 million, $1.7 million and $1.6 million, respectively.
The following table summarizes the restricted stock activity and weighted average grant-date fair values for the year ended December 31,
2013:
|
|
|
|
|
|
|
|
|
|
|
Shares
|
|
|
Weighted-Average
Grant Date
Fair Value
|
|
Non-vested at January 1, 2013
|
|
|
31,236
|
|
|
$
|
45.80
|
|
Granted
|
|
|
15,316
|
|
|
|
36.91
|
|
Forfeited
|
|
|
(1,586
|
)
|
|
|
51.89
|
|
Vested
|
|
|
(13,518
|
)
|
|
|
45.27
|
|
|
|
|
|
|
|
|
|
|
Non-vested at December 31, 2013
|
|
|
31,448
|
|
|
$
|
41.39
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2013, there was $6.0 million in total unrecognized stock-based compensation expense
related to non-vested stock-based compensation arrangements. The expense is expected to be recognized over a weighted average period of 2.5 years.
56
A reconciliation of the number of common shares used in the calculation of basic and diluted earnings per share (EPS) is
presented below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended
|
|
|
|
December 31, 2013
|
|
|
December 31, 2012
|
|
|
December 31, 2011
|
|
|
|
Shares
|
|
|
Per-Share
Amount
|
|
|
Shares
|
|
|
Per-Share
Amount
|
|
|
Shares
|
|
|
Per-Share
Amount
|
|
|
|
|
|
|
|
|
Basic EPS
|
|
|
17,087,104
|
|
|
$
|
1.26
|
|
|
|
16,910,830
|
|
|
$
|
1.36
|
|
|
|
16,503,773
|
|
|
$
|
1.42
|
|
|
|
|
|
|
|
|
Effect of dilutive securities
|
|
|
154,011
|
|
|
|
(0.01
|
)
|
|
|
218,298
|
|
|
|
(0.02
|
)
|
|
|
364,698
|
|
|
|
(0.03
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted EPS
|
|
|
17,241,115
|
|
|
$
|
1.25
|
|
|
|
17,129,128
|
|
|
$
|
1.34
|
|
|
|
16,868,471
|
|
|
$
|
1.39
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The effect of 403,649, 238,266, and 0 potentially dilutive securities were not included for 2013, 2012 and
2011 respectively, as they were antidilutive.
16.
|
EMPLOYEE RETIREMENT BENEFIT PLAN
|
The Company maintains a 401(k) defined contribution retirement plan for its eligible U.S. employees. The Company terminated
matching contributions on April 18, 2009 and reinstated them on March 1, 2011. Costs charged to operations in connection with the 401(k) plan during 2013, 2012, and 2011 aggregated $934, $876, and $640, respectively.
The Company has three reportable segments based upon geographic regions: Americas, Europe/Africa and Asia Pacific. The
Company includes costs related to Corporate in its Americas region. The Company does not incur R&D expenses in its Asia region.
The
Company develops, manufactures, markets, supports and sells CAD-based quality assurance products integrated with CAD-based inspection and statistical process control software in each of these regions. These activities represent approximately 99% of
consolidated sales. The Company evaluates performance and allocates resources based upon profitable growth and assets deployed.
57
The following table presents information about the Companys reportable segments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of and for the Years Ended December 31,
|
|
|
|
2013
|
|
|
2012
|
|
|
2011
|
|
Americas Region
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales to external customers
|
|
$
|
120,435
|
|
|
$
|
108,616
|
|
|
$
|
97,484
|
|
Depreciation and amortization
|
|
|
4,012
|
|
|
|
4,294
|
|
|
|
4,008
|
|
Operating income
|
|
|
6,270
|
|
|
|
2,949
|
|
|
|
8,864
|
|
Long-lived assets
|
|
|
23,791
|
|
|
|
21,775
|
|
|
|
23,024
|
|
Capital expenditures
|
|
|
3,563
|
|
|
|
1,435
|
|
|
|
3,371
|
|
Total assets
|
|
|
201,679
|
|
|
|
179,594
|
|
|
|
167,579
|
|
|
|
|
|
Europe/Africa Region
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales to external customers
|
|
$
|
103,415
|
|
|
$
|
100,111
|
|
|
$
|
99,568
|
|
Depreciation and amortization
|
|
|
1,880
|
|
|
|
1,658
|
|
|
|
1,807
|
|
Operating income
|
|
|
6,417
|
|
|
|
10,703
|
|
|
|
6,909
|
|
Long-lived assets
|
|
|
17,409
|
|
|
|
16,871
|
|
|
|
16,592
|
|
Capital expenditures
|
|
|
1,558
|
|
|
|
1,672
|
|
|
|
1,748
|
|
Total assets
|
|
|
122,197
|
|
|
|
110,152
|
|
|
|
92,231
|
|
|
|
|
|
Asia Pacific Region
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales to external customers
|
|
$
|
67,934
|
|
|
$
|
64,668
|
|
|
$
|
57,112
|
|
Depreciation and amortization
|
|
|
1,146
|
|
|
|
1,024
|
|
|
|
897
|
|
Operating income
|
|
|
17,467
|
|
|
|
17,902
|
|
|
|
17,085
|
|
Long-lived assets
|
|
|
2,721
|
|
|
|
2,562
|
|
|
|
2,076
|
|
Capital expenditures
|
|
|
1,319
|
|
|
|
1,565
|
|
|
|
869
|
|
Total assets
|
|
|
67,620
|
|
|
|
61,061
|
|
|
|
52,981
|
|
|
|
|
|
Totals
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales to external customers
|
|
$
|
291,784
|
|
|
$
|
273,395
|
|
|
$
|
254,164
|
|
Depreciation and amortization
|
|
|
7,038
|
|
|
|
6,976
|
|
|
|
6,712
|
|
Operating income
|
|
|
30,154
|
|
|
|
31,554
|
|
|
|
32,858
|
|
Long-lived assets
|
|
|
43,921
|
|
|
|
41,208
|
|
|
|
41,692
|
|
Capital expenditures
|
|
|
6,440
|
|
|
|
4,672
|
|
|
|
5,988
|
|
Total assets
|
|
|
391,496
|
|
|
|
350,807
|
|
|
|
312,791
|
|
The geographical sales information presented above represents sales to customers located in each respective
region, whereas the long-lived assets information represents assets held in the respective regions. There were no customers that individually accounted for 10% or more of total consolidated revenue.
58
Net sales to external customers is based upon the geographic location of the customer.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended December 31,
|
|
|
|
2013
|
|
|
2012
|
|
|
2011
|
|
Net sales to external customers
|
|
|
|
|
|
|
|
|
|
|
|
|
United States
|
|
$
|
109,757
|
|
|
$
|
97,912
|
|
|
$
|
91,452
|
|
Americas-Other
|
|
|
10,678
|
|
|
|
10,704
|
|
|
|
6,032
|
|
Germany
|
|
|
42,471
|
|
|
|
42,413
|
|
|
|
45,658
|
|
Europe-Other
|
|
|
60,944
|
|
|
|
57,698
|
|
|
|
53,910
|
|
Asia
|
|
|
67,934
|
|
|
|
64,668
|
|
|
|
57,112
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
291,784
|
|
|
$
|
273,395
|
|
|
$
|
254,164
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long lived assets consist primarily of property, plant, and equipment, goodwill, and intangible assets, and
are attributed to the geographic area in which they are located or originated.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
|
|
2013
|
|
|
2012
|
|
|
2011
|
|
Long-Lived Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
United States
|
|
$
|
22,720
|
|
|
$
|
20,824
|
|
|
$
|
22,041
|
|
Americas-Other
|
|
|
1,071
|
|
|
|
951
|
|
|
|
983
|
|
Germany
|
|
|
17,294
|
|
|
|
16,630
|
|
|
|
16,180
|
|
Europe-Other
|
|
|
115
|
|
|
|
241
|
|
|
|
412
|
|
Asia
|
|
|
2,721
|
|
|
|
2,562
|
|
|
|
2,076
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
43,921
|
|
|
$
|
41,208
|
|
|
$
|
41,692
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
59
18.
|
QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter ended
|
|
March 30,
2013
|
|
|
June 29,
2013
|
|
|
September 28,
2013
|
|
|
December 31,
2013
|
|
|
|
|
|
|
Sales
|
|
|
$65,370
|
|
|
|
$68,329
|
|
|
|
$68,190
|
|
|
|
$89,895
|
|
Gross profit
|
|
|
36,825
|
|
|
|
36,926
|
|
|
|
38,821
|
|
|
|
49,321
|
|
Net income
|
|
|
4,574
|
|
|
|
3,631
|
|
|
|
5,042
|
|
|
|
8,262
|
|
Net income per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
$ 0.27
|
|
|
|
$ 0.21
|
|
|
|
$ 0.29
|
|
|
|
$ 0.48
|
|
Diluted
|
|
|
$ 0.27
|
|
|
|
$ 0.21
|
|
|
|
$ 0.29
|
|
|
|
$ 0.48
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter ended
|
|
March 31,
2012
|
|
|
June 30,
2012
|
|
|
September 29,
2012
|
|
|
December 31,
2012
|
|
|
|
|
|
|
Sales
|
|
|
$65,229
|
|
|
|
$66,762
|
|
|
|
$60,734
|
|
|
|
$80,670
|
|
Gross profit
|
|
|
37,186
|
|
|
|
37,060
|
|
|
|
32,304
|
|
|
|
43,069
|
|
Net income
|
|
|
6,750
|
|
|
|
4,734
|
|
|
|
3,673
|
|
|
|
7,841
|
|
Net income per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
$ 0.40
|
|
|
|
$ 0.28
|
|
|
|
$ 0.22
|
|
|
|
$ 0.46
|
|
Diluted
|
|
|
$ 0.39
|
|
|
|
$ 0.28
|
|
|
|
$ 0.21
|
|
|
|
$ 0.46
|
|
60